Transitioning from Sponsor to Board Control
The Birth of a Board

Building a successful enterprise from the ground up involves the talent and
commitment of dozens—if not hundreds—of people. It’s no different with a co-op or a condo, especially in the earliest days of its
existence when it makes that transition from sponsor-run to board-run.
Sometimes that transitional road can be bumpy, and it can be a challenge
turning the seeds of a co-op or condo into a full-grown, fully functioning
community—especially if the sponsor and the board in question don’t always see eye to eye. If all of the parties involved can maintain focus and
keep the greater good in mind, however, the effort ultimately will pay off.

Where Do Boards Come From?

Just the way a constitution sets the stage for how a country will be run, a
co-op’s bylaws determine how it will function, and how it will change hands from the
sponsor who created it to the residential board members who will guide it in
the future.

“Basically, the transition is laid out in the bylaws,” says attorney Leonard H. Ritz, of the law offices of Adam Leitman Bailey, PC in
Manhattan. In most situations, the board will be comprised initially of
friends, employees, or other designates of the sponsor. As more units are sold
within the building, that number will slowly shift.

“On day one, all board members are designated by the sponsor,” Ritz says. Elections are then held at the first unit owner meeting. Over time,
the board will be filled with more actual residents and fewer members chosen by
the sponsor until the residential members have a clear majority. Eventually, if
all goes as planned, the sponsor will have little or no representation on the
board.

In a conversion scenario, the sponsor is required to turn over control of the
board after 50 percent of the units have been sold, or after five years—whichever comes first, says attorney Stuart Saft of the law firm of LeBoeuf Lamb
Greene & MacRae LLP in Manhattan. In new construction, the sponsor has the right to
designate at what percentage he or she must turn it over, but they must turn it
over by the fifth year, just as in the conversion scenario.

Comments

I am board president of a Condo in Midtown. The sponsor has been here for 30 years, since 1985. They sold their unsold units (75) to another investor group in 2000. There are currently 42 Sponsor units in the building and I want to know if there is any laws that would help us get the sponsor totally out of the building.

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CAI Webinar: Eyes in the Sky: Using Drones in Your Community Association

Over the last few years drones have become more prevalent in community associations. For engineers—and now association boards, managers, and management companies—drones have become their “eyes in the sky.” From the safety of the ground, licensed pilots carefully maneuver drones to inspect roofs, home and building facades, construction sites, and anything else that can be seen from above within your community. Not only do drones provide pictures and videos, they also can be equipped with special thermal imaging cameras to help identify hidden moisture and heat loss. Learn all about this emerging technology and how to use it for your community! For information, visit www.caionline.org.

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In this 2-session class, attorney Marc Luxemburg and property manager Gregory Carlson examine all aspects of operating cooperatives. The class is limited to board members of housing cooperatives. It is jointly sponsored by CNYC, the Federation of New York Housing Cooperatives and Condominiums and the Association of Riverdale Cooperatives, each of whose members attend at the member rate. Advanced registration is required. A light supper is served in the break. The cost is $125 per person if your cooperative is a member of CNYC; ARC or FNYHC, $200 for non-members. Pre- reserve, by phone (212) 496- 7400 or e-mail to workshops@CNYC.coop. Payment sent to CNYC at 250 West 57 Street, Suite 730, NYC 10107 confirms your registration. There is a surcharge of $15 for late payment.

In this 2-session class, attorney Marc Luxemburg and property manager Gregory Carlson examine all aspects of operating cooperatives. The class is limited to board members of housing cooperatives. It is jointly sponsored by CNYC, the Federation of New York Housing Cooperatives and Condominiums and the Association of Riverdale Cooperatives, each of whose members attend at the member rate. Advanced registration is required. A light supper is served in the break. The cost is $125 per person if your cooperative is a member of CNYC; ARC or FNYHC, $200 for non-members. Pre- reserve, by phone (212) 496- 7400 or e-mail to workshops@CNYC.coop. Payment sent to CNYC at 250 West 57 Street, Suite 730, NYC 10107 confirms your registration. There is a surcharge of $15 for late payment.

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Learn about the latest building services from more than 300 exhibitors, Attend educational seminars, get free advice from industry experts, and network with your peers at this leading real estate trade show in New York. For information and to register, visit www.coopexpo.com.

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